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MY VIEW: Alice Rivlin

Dec 17, 2012

Former CBO Director and CRFB Board Member cautioned political leaders in a op-ed in The Hill, that merely finding just enough savings to repeal the fiscal cliff would be not only be a wasted opportunity but a sure sign that Washington is still not serious about controlling our unsustainable debt.

Both entitlement reform and tax reform should be pursued, only through serious reform are we likely to find enough in savings to put our debt on a downward path as a share of the economy. Rivlin writes:

While avoiding the “fiscal cliff” is essential to near-term recovery and job growth, it is just the first step to restoring sustained prosperity in America. It would be catastrophic if negotiations between the president and Congress succeeded in avoiding the cliff but failed to address the fundamental threat of projected debt rising faster than the economy can grow.

We must have fundamental tax reforms that raise revenues and entitlement program reforms that slow the growth of healthcare spending and preserve Medicare and Medicaid for those who need them over the long run.

The “fiscal cliff” is an artificial barrier designed to pressure political leaders to get the nation’s budget on a sustainable path. The worst possible lame-duck deal would be a small one that avoids the cliff and thus removes pressure from policymakers to construct a much larger, multi-year agreement next year. Such a deal would do nothing for long-term fiscal stability.

Rivlin argues that any deal to replace the fiscal cliff should contain an overall framework that would significantly address our debt as well as a legislative process and enforcement mechanism that would allow for needed reform like that proposed in Domenici-Rivlin 2.0. We've also called for negotiators to agree to an significant overall framework, a downpayment, and enforcement mechanism that would lead lawmakers to put debt on a sustainable path. Argues Rivlin:

Imagine what a Medicare reform bill or a fundamental tax reform bill would look like after two or three months’ debate on the Senate floor without the time protections of reconciliation or a similar process.

A bad short-term deal that allows policymakers to avoid the harder long-term decisions would be a step backward. It might make Wall Street happy for a moment or two, but it will mean serious risk to the prosperity of the American people in the long run.